Question: Consider a corporation whose expected EBIT is 100M for ever. The corporation's tax rate is 20%. Depreciation equals investment. The corporation's only debt is a

Consider a corporation whose expected EBIT is 100M for ever. The corporation's tax rate is 20%. Depreciation equals investment. The corporation's only debt is a perpetuity with an interest rate of 10%. The corporation's WACC is 15%. The value of the levered corporation is 10% higher than it would be if the corporation were unlevered. What is the expected return on this levered corporation's equity?

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